Former Qwest CEO Joe Nacchio, serving time at a prison camp in Pennsylvania, was ordered today to appear in federal court in Denver for a hearing to review his plans to waive attendance at his re-sentencing.

While Nacchio won’t have to deal with the likes of Cyrus the Virus, I’m guessing Con Air won’t be as comfortable as the private jet that shuttled him back and forth from New Jersey to Denver during his time as CEO of Qwest from 1997 to 2002.

As for his court appearance?

“I would fully expect him to appear in his prison clothes,” said former federal prosecutor Rick Kornfeld.

Kornfeld said defendants or criminals who are in custody have the option to appear at a hearing in civilian clothes only if it is held before a jury.

Nacchio’s hearing will be in front of U.S. District Judge Marcia Krieger, who is basically forcing Nacchio to show up for a hearing just to say that he doesn’t want to show up for hearings connected to his re-sentencing.

In March, Nacchio attorney Sean Berkowitz indicated Nacchio would waive his right to appear at his re-sentencing. The Justice Department objected, arguing that Nacchio should be required to attend.

The government’s objection is “bizarre,” said Douglas Berman, a law professor and sentencing expert.

“I assume part of it is they want him to keep having to do perp walks,” Berman said. “That also explains why he doesn’t want to show up.”

Nacchio’s attorneys could always pull a rabbit out the hat and find a way to get him out of appearing in court. This case has taken so many twists and turns that I wouldn’t be surprised if that happens.

A federal judge in Denver dealt a blow this week to the Securities and Exchange Commission’s civil lawsuit against five former Qwest officials, including former chief executive Joe Nacchio.

U.S. District Judge Marcia Krieger ruled that the SEC doesn’t have enough evidence to prove initial allegations that the defendants improperly booked revenue for Qwest from 1999 to 2002. She ordered the SEC to focus on claims that Qwest misled investors by not separating monthly, recurring sales from lump sum, one-time revenue in the company’s regulatory filings.

Investors and analysts generally place more value on recurring revenue because it better reflects a company’s financial condition.

“It becomes a very technical case, and sounds like one that is not going to be very easy for them to win,” said former SEC attorney Peter Henning, now a law professor at Wayne State University.

The SEC said today that it will not drop the 5-year-old suit and is deciding whether to ask for a reconsideration on Krieger’s ruling.
“The SEC is planning on going forward,” said SEC attorney Polly Atkinson.

Krieger’s order states that she has not addressed “the major thrust” of the case.

“That should tell you what part of the case has been affected by this,” Atkinson said.

In addition to Nacchio — who is serving a six-year prison term for criminal insider trading — defendants in the SEC case include former Qwest president Afshin Mohebbi, former chief financial officer Robert Woodruff and former accountants Frank Noyes and James Kozlowski.

The SEC is seeking the repayment of stock-sale profits, bonuses and salaries earned from 1999 to 2002.

Initial claims focused on billions of dollars in supposedly phantom revenue that Denver-based Qwest booked from swaps of network capacity with other telecommunications companies. Qwest recorded the revenue in a lump sum rather than spread out over the life of the multiyear contracts

The suit is now focused, in large part, on disclosure issues — a change that could trim several weeks off a potential trial and cut the number of witnesses by at least half.

A five-year-old civil fraud lawsuit lodged against former Qwest chief executive Joe Nacchio and four others appears headed for trial, as the Securities and Exchange Commission acknowledges in a court filing that a settlement with all of the defendants is unlikely.

Separately, Nacchio is seeking to have the case transferred from federal court in Denver to Kansas or another district, citing a study that shows 64 percent of potential jurors in Denver believe he is guilty.

The SEC discloses in a court filing that it held settlement talks with attorneys for former Qwest president Afshin Mohebbi in September and November. It states that “presently there is no possibility of settlement” with Mohebbi.

“It appears that there is little possibility of settlement with all parties, although there may be settlements between some parties,” SEC attorneys wrote in the filing.

SEC cases are usually settled out of court.

Nacchio, Mohebbi, former Qwest chief financial officer Robert Woodruff and former Qwest accountants Frank Noyes and James Kozlowski are accused of engaging in an accounting fraud that inflated the Denver-based company’s revenue by $3 billion from 1999 to 2002. Qwest later restated much of that revenue.

Qwest is seeking $350 million in federal stimulus grants to extend high-speed Internet service to more than 500,000 homes, businesses and schools in rural communities across its 14-state local service territory.

The Denver-based company would spend $100 million upgrading its network in Colorado, adding or improving broadband service to nearly 108,000 homes. Internet speeds would range from 12 megabits per second to 40 megabits per second.

The project would reach more than 18,000 businesses, schools, libraries and other facilities in Colorado, which would receive the largest portion of the spending. Qwest estimates that it would create or retain 5,000 jobs in the state.

The build-out will cover more than 100 Colorado communities, including Aspen, Central City, Grand Junction, Greeley, Hudson, Sterling and Windsor.

The total cost of the project is $467 million, with Qwest covering 25 percent, or $117 million.

“Much like the water and electric programs the government established to encourage rural development, federal grants are needed to enable the deployment of broadband to high-cost, unserved areas,” said Steve Davis, senior vice president of government relations for Qwest.

The federal economic stimulus program includes $7.2 billion in funding for extending broadband to unserved or under-served communities. Broomfield-based Level 3 Communications this month received $13.7 million in Read more…

Even though Qwest posted a 39 percent drop in net profit and a 9 percent drop in revenue in 2009, chief executive Ed Mueller enjoyed a bump in pay, receiving total compensation of $12.1 million for the year, according to the company’s proxy statement.

He was paid $11.4 million in 2008. Mueller’s compensation for 2009 includes a base salary of $1.25 million and a cash bonus of nearly $2.5 million. His salary and bonus for 2008 were $1.2 million and $2.25 million, respectively.

Mueller received in $7.6 million stock awards and options in 2009. Other compensation included personal use of the corporate jet valued at roughly $249,000. Qwest also covers maintenance costs associated with Mueller’s home security system.

Teresa Taylor, appointed chief operating officer in August 2009, was the next highest paid executive, receiving total compensation of $5.6 million.

In 2009, Qwest cut 2,800 jobs, or 8 percent of its workforce. At the end of the year, the Denver-based company employed 30,100.

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Correction (posted March 24, 2010): Qwest had a 39 percent drop in net income in the fourth quarter of 2009, but recorded a 2 percent gain in profit for the entire year.

Federal prosecutors want imprisoned former Qwest chief executive Joe Nacchio to show up in Denver federal court when he receives a new sentence June 24.

Nacchio’s presence at the hearing would help achieve some of the goals of sentencing, such as “having the defendant personally receive the
official expression of the condemnation of his conduct, showing confidence in the justness of the sentence, promoting respect for the law, promoting deterrence and treating victims fairly,” Assistant U.S. attorney Kevin Traskos wrote in a court document filed Monday.

Nacchio’s attorneys had previously waived his right to appear at the resentencing. Convicted on 19 counts of insider trading in 2007, Nacchio began serving a six-year prison term in April at a federal prison camp in Pennsylvania.

A jury found Nacchio guilty of illegally selling $52 million in Qwest stock in early 2001 based on material, insider information.

In July 2009, a federal appeals court ordered a new sentence for Nacchio, ruling that the trial judge miscalculated Nacchio’s gains during the initial sentencing. The sentence is based, in part, on the amount of money Nacchio is determined to have illegally gained from having the insider information, which included warnings from senior executives that Qwest’s financial health was deteriorating.

In waiving his right to physically appear at sentencing, Nacchio cited the case of Adelphia founder John Rigas and his son, Timothy, who appeared at their resentencing hearing via videoconferencing from prison in 2008.

Prosecutors said the videoconferencing option is not available under 10th Circuit rules, which covers Colorado. They also noted that John Rigas was over 80 years old and had health problems, including bladder cancer.

John Rigas had his 15-year sentence for securities fraud and other charges cut to 12 years. Timothy Rigas had his reduced from 20 years to 17 years.

Traskos noted that Nacchio didn’t give a reason for why he shouldn’t attend the sentencing.

“Given the lack of any such reason, it might create the impression of
unfairness to allow the defendant to skip his sentencing,” Traskos wrote in the court filing.

I’ll have a story in Thursday’s paper about Qwest and its investment in ZillionTV, an over-the-top video startup that appears to be a total dud.

Almost immediately after ZillionTV went public with its business plan in March 2009, questions surfaced about its potential.

ZillionTV entered the game fairly late as the likes of Roku, Vudu and others were already around when it announced plans to offer 15,000 free movies and shows by the end of 2009. The content would be streamed over the Internet and supported with advertisements. Viewers could pay a per-program fee to watch it without ads. Initial reports stated the the company’s set-top box would cost less than $100.

Former Qwest executive vice president Neil Cox (pictured) appeared to reference ZillionTV’s ad-supported model during a keynote in December. He spoke highly of OTT video and said IP-TV would break down, similar views to that of Qwest CEO Ed Mueller.

As Multichannel News first reported, Qwest made a $10 million investment in ZillionTV in February 2009, according to legal documents tied to a civil complaint lodged against ZillionTV.

The documents show that ZillionTV went back to Qwest in December seeking additional funding. Qwest has called its investment in the company “very small, or immaterial” and has not publicly confirmed or deny the $10 million figure. At $10 million, Qwest was among ZillionTV’s largest investors.

Denver-based Qwest has notified certain shareholders about a voluntary “odd-lot” program, which will allow owners of fewer than 100 Qwest shares to unload the all of their shares without incurring any transaction fees.

The shares will be sold on the open market. Shareholders will receive a price “equal to the weighted average price of all shares sold in the open market during the week” in which they participate in the program, according to a letter to shareholders.

To participate, shareholders have to notify their broker or financial advisor by March 17. The program ends March 19. Proceeds will be distributed to those participating in the program within 2 weeks.

In general, odd-lot programs or buybacks are used by companies to cut administrative costs (savings come from having to service fewer shareholder accounts).

The compensation and human-resources committee of Qwest’s board of directors has approved an incentive plan for management and senior executives, according to a regulatory filing today.

Like last year, bonuses for 2010 will be based on “target percentages” and the financial performance of the company, business unit and individual employee.

Qwest chief executive Ed Mueller’s target percentage remains at 200 percent. He was paid a bonus of $2.25 million in 2009 for 2008’s performance, based on a corporate performance percentage of 88.3 percent and individual performance percentage of 106 percent. The corporate and individual percentages are factored on a scale of 0 to 150 percent. (By the way, that’s former Qwest CEO Dick Notebaert Read more…

I’m on assignment today, so my colleague Aldo Svaldi is covering Qwest’s earnings announcement, which includes handling the quarterly phone interview with the company’s top executives.

I passed along a few questions for Svaldi to ask, including one about Qwest CEO Ed Mueller’s Cherry Creek home, which was put on the market in June.

Mueller told The Denver Post in August, through a spokeswoman, that he has no plans to leave Denver and merely wants to check out other neighborhoods in the area. So the follow-up, six months after we published the initial story, was whether he had sold the home and if he had found a new place.

Mueller compared the question to being asked about the clothes he was wearing, and wondered why the paper was obsessed with the issue.

Qwest took a $1.8 million loss from buying and selling Mueller’s Bay Area home as part of the relocation expense when he took the job in August 2007, so shareholders may be interested in the issue. Rumors abound that the company could be targeted for a takeover, so assurances that Mueller has established firm roots in the Denver area would probably be welcome to many of the company’s 31,000 workers, including about 8,000 in Colorado.

And he is the CEO of perhaps the most visible company that is headquartered in Denver, so his real estate dealings are of public interest, not unlike Mike Shanahan or Jay Cutler.

Emilie Rusch covers retail and commercial real estate for The Post. A Wisconsin native and Mizzou graduate, she moved to Colorado in 2012. Before that, she worked at a small daily newspaper in South Dakota. It's the one with Mount Rushmore.